Coinbase IPO Valuation

Dear Reader,

Coinbase, the American cryptocurrency exchange platform, is about to go public via direct listing today.

According to various news sources, Coinbase could go public at close to 100 billion USD valuation.

What is the real intrinsic worth of Coinbase?

I estimate Coinbase could actually grow into its 100 billion USD valuation in 5-7 years. Currently, Coinbase is worth, according to my estimates, around 70 billion USD.

According to its IPO SEC Filing Coinbase made 1.277 bln. USD in revenue and 127.471 mln. USD in profit in the calendar year 2022 compared to revenue of 482.9 mln. USD and incurred a  loss of 30.387 mln. USD in the calendar 2019.

			Year Ended December 31,
			2020						2019
Consolidated Statement of Operations Data			(in thousands, except per share data)
Revenue:
Net revenue			$	1,141,167					$	482,949
Other revenue			136,314						50,786
Total revenue			1,277,481						533,735
Operating expenses:
Transaction expense			135,514						82,055
Technology and development			271,732						185,044
Sales and marketing			56,782						24,150
General and administrative			279,880						231,929
Restructuring			—						10,140
Other operating expense			124,622						46,200
Total operating expenses			868,530						579,518
Operating income (loss)			408,951						(45,783)
Other income, net			(248)						(367)
Income (loss) before provision for (benefit from) income taxes			409,199						(45,416)
Provision for (benefit from) income taxes			86,882						(15,029)
Net income (loss)			$	322,317					$	(30,387)
Net income (loss) attributable to common stockholders:
Basic			$	108,256					$	(30,387)
Diluted			$	127,471					$	(30,387)
Net income (loss) per share attributable to common stockholders:
Basic			$	1.58					$	(0.50)
Diluted			$	1.40					$	(0.50)
Weighted-average shares of common stock used to compute net income (loss) per share attributable to common stockholders:
Basic			68,671						61,317
Diluted			91,209						61,317
Pro forma net income per share attributable to common stockholders (unaudited):
Basic			$	1.76
Diluted			$	1.57
Pro forma weighted-average shares of common stock used to compute pro forma net income per share attributable to common stockholders (unaudited):
Basic			182,945
Diluted			205,575

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			As of December 31, 2020
			Actual						Pro Forma(1)
Consolidated Balance Sheet Data			(in thousands)
Cash and cash equivalents			$	1,061,850					$	1,061,850
Customer custodial funds			3,763,392						3,763,392
Total assets			5,855,414						5,855,414
Custodial funds due to customers			3,849,468						3,849,468
Total liabilities			4,329,363						4,329,363
Convertible preferred stock			562,467						—
Total stockholders’ equity			963,584						1,526,051

Coinbase's growth insures the company will be a large capitalization company in the near future. Yes, new entrants to the market can broker cryptocurrencies at zero commission, but Coinbase has first mover advantage and will monetize its cryptocurrency brokerage platform in other ways.

What is more, cryptocurrency is a disruptive force. Its underlying hashing blockchain algorithm can profoundly change many industries like finance, insurance, real estate. Bitcoin's distributed ledger can provide a safe storage platform and may even disrupt cloud computing.

This means that Coinbase could use its experience and knowledge in the cryptocurrency market to enter new industries and thus achieve higher future revenues and profits which will translate into a higher valuation.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich